As long as there is no underlying interest rate cap in Wisconsin (set at any amount), there will always be big loopholes for the industry. No rate cap protects the mono-line companies like Advance America and Title Max that just have the one product. Companies that do check cashing, money gram services, bill pay, etc may not like the cap because they can't charge very high rates on loans, but they will have other
products that can keep them in business.
Basic differences are this bill permits total obligations up to $900, not $600. Does not ban any car title loans. Does set minimum zoning restrictions and permits locales to do more. And permits one loan renewal before the24-hour cooling off period applies. Same as I've seen the industry offer before.
Here is what I think it does in a nutshell:
1. Specifically authorizes payday lending by definition. Specifically authorizes loans via unfunded check and/or ACH/electronic fund transfer.
2. No rate cap for small consumer loans before the maturity date of the loan. $15 NSF fee per check used to get loans.
3. Authorizes aggregate liability up to $900 principal and fees and state-authorized loan flipping. (Disastrous) Can be multiple loans up to that amount. No relation to percentage of gross income.
4. Sets up a database. Lender can't charge a fee for use of the database, but since there is no cap on interest, lenders could just roll that into the cost of the loan. Also no requirement for transparent review by third parties (big mistake, available in other states), no real penalty for accurate real-time reporting, material misstatements, etc. Eliminates requirement that industry verify reported date by oath or affirmation.
5. Sets a default rate of interest at 2.75% per month, which kicks in if the borrower defaults on the loan. (Apparently there is a default rate for all consumer loans. However, payday loans seldom "default" since the lender holds access to the borrower's bank account. People keep the loans afloat to avoid the bounced checks/NSF fees charged if they fail to make good on the loan. As long as people take out back-to-back loans, they don't get the benefit of this lower default rate.
6. No threats or criminal actions for failing to repay the loan. (Already should be the case since these are not "hot" checks.)
7. Zoning requirements included but localities can do more. 1,500 feet from the next payday lender, 150 feet from certain residential zoning districts.
8. Loans void if lender doesn't have a license. Lists many reasons the DFI "shall" grant a license but for various violations, DFI "may suspend or revoke" license.
9. Authorizes one loan roll over. After that, borrowers get a 24 hour cooling off period before being able to take out a new loan. Not at all a help to constituents.
10. Reduces current annual reporting requirements.
11. Defines "consumer small loan" to include loans based on checks and debits as well as on a promissory note. Also exempts consumer goods and services loans and then builds in a loophole for DFI to grant written authorization to grant such a license.
12. Can prepay loan, but who has the money to do that?
13. Can't make loan to somebody if licensee knows or should have known that the Social Security number is fake. Not sure how this is enforced.
14. No false advertising. No blanks on contract forms. Have to hand out information, give receipts.
Predatory Lending >